FINANCIAL ASSISTANCE TO THE HORSE RACING INDUSTRY
The overall financial health of the horse racing industry in Maryland has declined over the past 20 years, with the advent of alternative forms of legalized gaming in the State and throughout the nation. During previous legislative terms, much attention was focused on legalizing and expanding simulcast wagering opportunities in the State. During the past four years, more attention was devoted to providing short term financial relief and to the possibility of slot machines at the racetracks (discussed below).
1997 Session
In a move to bolster purses and provide short-term financial assistance to the thoroughbred racing industry, Chapter 748 of 1997 provided a one-time disbursement of $500,000 from uncashed pari-mutuel tickets for the Maryland Million Races for marketing, purses, and promotional activities.
Chapter 751 of 1997 made the State responsible for most of the personnel costs of the forty-eight additional (non-administrative) personnel, which were previously paid by the race track via reimbursable special funds. This shifted the cost of employment of approximately $1.8 million annually from the tracks to the State, with the tracks only responsible for the pension contribution of these employees.
Chapter 750 of 1997 reduced the wagering tax from .5% to .32% and thus increased the distribution to purses by 0.18% of each mutuel pool for a period of one year. Approximately $1 million was gained for purses through this tax reduction. In addition, $5 million in lottery revenue overattainment was dedicated to be used for racetrack purses, with 70% to the thoroughbred purses and 30% to the harness purses. The bill also created a Commission to Study Ways to Improve the Financial Viability of the Horse Racing Industry.
1998 Session
Chapter 519 of 1998 implemented the short-term relief measures that were outlined in the recommendations of the Commission to Study Ways to Improve the Financial Viability of the Horse Racing Industry, a joint legislative/executive group that functioned during the 1997 legislative interim. The measures included a number of studies to determine the long-term measures that might best assist the industry, and the use of $10 million in revenue overattainment to increase spending on noncapital items, such as purses, bred funds, and marketing. Under Chapter 519, the $10 million in funding is comprised of $5 million from general fund revenues that is appropriated in the fiscal 1999 budget and an additional $5 million from possible lottery surpluses.
The Commission to Study Ways to Improve the Financial Viability of the Horse Racing Industry also recommended that several initiatives passed during the 1997 Session be continued at least for another year. Under Chapter 477 of 1998, the State wagering tax rate of 0.32% remained in place until June 30, 1999. In addition, any funds remaining in the horse racing special fund at the end of the year are to be distributed to the Maryland- Bred Race Fund and the Standardbred Race Fund rather than to the general fund, with approximately $814,000 thus allocated to the bred funds. Additionally, Chapter 366 of 1998 continued the distribution of $500,000 from uncashed pari-mutuel tickets to the Maryland Million for marketing, purses, and promotional activities for another year.
RACING AND GAMING REGULATION
Gaming
The General Assembly repeatedly considered measures that would have imposed a statewide regulatory scheme for all gambling activities. House Bill 106 of 1995 (failed) would have established a Maryland Charitable Gambling Commission to regulate gaming by the State's charitable organizations. House Bill 1410 of 1996 (failed) would have established a Maryland Slot Machine, Tip Jar, and Casino Gambling Commission. During the 1997 Session, House Bill 973 (failed) would have created a Maryland Gaming Commission and Senate Bill 854 (failed) would have established a 5-member Maryland Gaming Control Commission.
Horse Racing
$Average Daily Handle Breakpoint
Measures dealing specifically with the regulation of racetracks were more successful. Chapter 590 of 1995 raised the breakpoint in the average daily handle from $300,000 to $600,000 for figuring out the amount and distribution of the takeout in harness racing. This increased the amount of the purses by shifting money away from bettors.
$Racing Days/Simulcasting
Chapter 753 of 1997 increased from 450 to 620 the number of racing days that may be awarded to all harness racing licensees in a calendar year. This legislation also increased from 216 to 266 the number of racing days that may be awarded to all thoroughbred licensees in a calendar year.
Chapter 747 of 1997 allowed thoroughbred licensees to receive simulcast races held at out-of-state tracks after 6:15 p.m., if approved by the relevant harness racing interests. Also, the Act prohibited live harness racing after 2 a.m. unless circumstances beyond the control of the licensee cause a delay.
Chapter 749 of 1997 reduced from 65 to 40 the minimum number of live racing days that must be conducted at Ocean Downs harness racing track for Ocean Downs to qualify as a receiving track for intertrack betting purposes.
House Bill 1091 of 1998 (failed) was introduced as the result of a Maryland Racing Commission decision this past fall that prohibited the Ocean Downs harness racing facility from directly importing out-of-state thoroughbred race signals. The legislation would have authorized Ocean Downs to contract for pari-mutuel betting on a race that is held at any out-of-state track where betting on horse racing is lawful without approval of the State Racing Commission. However, an agreement was reached by the Maryland Jockey Club and Bally's Maryland, Inc. (the owner of Ocean Downs) on March 27, 1998 that resolved a long-standing dispute over simulcasting thoroughbred signals between the two interests. Due to the agreement, the legislation was withdrawn, and a pending lawsuit on this same issue is also being dismissed.
$Pensions of Racing Employees
Chapter 556 of 1995 provided for the inclusion of "additional employees" of the Maryland Racing Commission in the pension system for State employees. The licensees must allocate funds for employer contributions from the 0.25% of the handle set aside for racetrack employee benefits.
VIDEO LOTTERY TERMINALS AND OTHER GAMBLING INITIATIVES
Consistent with efforts nationwide, legislation to introduce slot machines at the racetracks and other venues generated much debate and discussion in Maryland during the past four legislative sessions. The main impetus for such legislation came from two directions: (1) to produce a significant new form of revenues for the State, local governments, and/or nonprofits; and (2) to revitalize the racing industry. However, no legislation that actually allowed for such an expansion of legal gambling activities in the State actually passed.
1995 Session
As introduced, Chapter 579 of 1995 would have created a Maryland Gambling Commission and would have authorized the Commission to license not more than five persons to operate casinos. This legislation was rewritten to establish a nine-member Joint Executive-Legislative Task Force to Study Commercial Gaming Activities in Maryland. This task force set the tone for much of the legislation and debate that followed.
Immediately before the 1996 Session began, this task force issued its final report to the General Assembly and the Governor. The report recommended to the Governor that current prohibitions be maintained against commercial casino gaming, including slot machines at race tracks, because the task force: (1) was not convinced that commercial casino gaming would bring in substantial net economic benefits to the State; (2) believed that there might be substantial social costs arising from the introduction of such gaming; and (3) was concerned that commercial casino gaming might lower the quality of civic and moral life in Maryland.
Other legislation was introduced during the 1995 Session that sought to expand gambling in the State. Senate Bill 768/House Bill 1101 of 1995 (both failed) were similar to the original legislation discussed above and would have created a Maryland Controlled Gaming Commission as an independent unit of State government and allowed controlled gaming in land-based facilities. The General Assembly considered two bills this year that would have authorized riverboat gambling. House Bill 809 of 1995 (failed) would have created a State Commission to regulate vessel gaming on vessels underway or at dock on most navigable bodies of water in or around the State. House Bill 392 of 1995 (failed) also would have authorized gaming on vessels but would have provided for a county tax on gaming revenues as well as a State tax.
1996 Session
The issue that dominated gaming legislation during the 1996 Session concerned the authorization of slot machines at racetracks. House Bill 1380 of 1996 (failed) would have authorized a maximum of 3,000 machines at Laurel Race Course, 1,000 machines at Pimlico Race Course, 1,000 machines at Rosecroft Raceway, and up to 6,500 machines at satellite simulcast facilities in the State. House Bill 1435 of 1996(failed) would have authorized the operation of a maximum of 2,000 machines at each of the four mile thoroughbred and harness racing tracks in the State.
1997 Session
In response to the horse racing industry's cries for new revenue sources to compete with tracks in Delaware and other states that offer slot machine gambling at race tracks, legislation authorizing slot machines at the tracks one again dominated the 1997 Session. House Bill 1433 of 1997 (failed) would have allowed thoroughbred and harness tracks to operate up to 2,000 slot machines. House Bill 955 of 1997 (failed) would have allowed "electronic gaming devices" (i.e., slot machines) at Pimlico Race Course, Laurel Race Course, Rosecroft Raceway and certain offtrack betting sites.
The 1997 Session brought several new attempts to expand gambling in the State, and several involved slot machines operated by nonprofit organizations. At the time, nonprofit organizations in eight Eastern Shore counties were authorized to operate slot machines. House Bill 612 of 1997 (failed) would have allowed nonprofit organizations in Prince George's County to operate slot machines for public use, and House Bill 1111 of 1997 (failed) would have extended this authority to nonprofit organizations in each county in the State. House Bill 972 of 1997 (failed) would have raised reporting requirements and other oversight provisions concerning nonprofit organizations that now operate slot machines. Also in 1997, House Bill 1198 (failed) would have enabled the Board of County Commissioners for Dorchester County to authorize the construction of a $100 million hotel-marina complex -- along with 1,000 slot machines -- in Cambridge.
1998 Session
House Bill 1324 of 1998 (failed), similar to legislation discussed above, would have authorized 8,000 video lottery terminals at the racetracks in the State. House Bill 678 of 1998 (failed) would have authorized 11,250 video lottery terminals in the State, but was significantly different from other legislation that has been introduced on this subject in past sessions. The bill proposed a constitutional amendment authorizing video lottery terminals at up to 10 locations in the State, including racetracks, off-track betting locations, and at two tourist destination locations. An Education Trust Fund was designated as the primary recipient of revenues from the video lottery terminals, which was to be used to supplement education programs at all levels throughout the State. Under the legislation, State revenues would have increased by over $420 million annually after the first three years, and local revenues would have increased by almost $30 million.
Casino Nights
Chapter 621 of 1995 allowed a volunteer fire company or bona fide fraternal, civic, war veterans', religious, amateur athletic, or charitable organization or corporation in Anne Arundel County to conduct a casino event no more than once a year and limited to specified card or dice games. Wagers are limited to $2 for each hand of cards or roll of dice. The Act prohibited casino events on or after October 1, 1997.
Similarly, Chapter 557 of 1995 prohibited casino nights to be held in Prince George's County after 2 years following the effective date of the Act. This legislation also overturned a Maryland Court of Appeals decision prohibiting volunteer dealers and other workers to receive tips from patrons, freeing volunteers to accept tips. The Act, however, expressly prohibited workers from being paid a salary or compensation of any kind. The Act required Prince George's County to impose a tax of up to 20% on the gross receipts derived from casino night activities, and limited the number of permits for operation of casino nights to 21 at any time.
During the 1997 Session, attempts were made to extend the termination date for casino nights in Prince George's County, which were due to close on May 25, 1997. House Bill 702 (failed) would have extended this "sunset" date until July 1, 1999. Senate Bill 856 (failed) also would have extended the "sunset" of casino gambling until July 1, 1999, and would have also imposed a "sunset" of July 1, 1999 date on all other types of charitable gambling activities.
Tip Jars
In Western Maryland, the preferred form of gambling used by local fund-raising organizations is tip jar gambling. Tip jar gambling consists of pieces of sealed paper placed in a packet and sold. When opened, the paper reveals several numbers that patrons attempt to match to winning numbers. Chapter 636 of 1995 created a Washington County Gaming Commission to recommend to the Board of County Commissioners of Washington County regulations or guidelines concerning the administration of laws relating to tip jar gambling in the County. The Act specified the types of nonprofit organizations that may operate tip jars and allows for profit restaurants and taverns to operate them as well (1) if the restaurants and taverns possess liquor licenses and (2) if part of their gross proceeds is deposited in a fund that is distributed to charitable organizations and the Washington County Volunteer Fire and Rescue Association. The tip jar provisions of the Act were scheduled to terminate on April 30, 1997.
Chapter 663 of 1996 modified various provisions governing tip jar gambling in Washington County. Major changes included establishing a temporary tip jar license and allowing private establishments to retain more of the proceeds from the games. The bill extended the termination provision for the laws governing tip jar regulation in the county to June 30, 1999.
During the 1998 Session, Washington County proposed both Chapter 229 and Chapter 548 to address issues surrounding tip jar regulation in the county. Chapter 229 of 1998 repealed the June 30, 1999 termination date for provisions of law establishing the Washington County Gaming Commission and providing for the regulation of tip jar gaming in Washington County. Chapter 548 of 1998 provided for a number of changes to the Washington County Gaming Commission and tip jar regulation in the county. Most significant is a provision that requires that club tip jar licensees contribute the dedicated 15% of the gross profits to charitable purposes directly to the Washington County Gaming Fund. Contributions to the fund are expected to increase by approximately $300,000 per year.